KATADATA – Two interesting articles have been published recently in Katadata (www.katadata.co.id) in reference to the need for Indonesia to carry out more exploration to entice investors. A statement by the current Minister of EMR Sudirman Said, “Our main weakness is that we do not know which area has potential oil reserves, it is usually the foreigners who have access to that sort of information."
This statement does not explain why IOC’s have been drilling dry holes.
Throughout the history of exploration and often science in general, necessity has been the mother of invention. The tools and the techniques of exploration have been invented and perfected to solve critical problems. However, in recent decades, most of the innovation in hydrocarbon exploration has been in extraction and not exploration. As hydrocarbon targets have become deeper, smaller and more complex, new and more cost-effective exploration methods are required to meet today’s energy needs. This means exploration geoscientists need to open their minds to new ideas.
Today’s E&P industry relies primarily on geophysical technologies to find oil and gas. These technologies are sophisticated and effective to a certain extent and have served us well to this point. However, as is the case with all technologies, there are limitations. These limitations may be the primary constraining factor that limits growth presently.
Presently, the way to discover if oil or gas is located in a basin is to carry out geophysical surveys including, gravity, magnetics, radiation, 2D and 3D seismic surveys, both offshore and onshore. Both of these terrains have their inherent problems; for land, many areas will be covered by canopy with the areas being extremely undulating; for offshore, this is in deep water with differing sea conditions throughout the year. Other complications exist, such as the difficulty of access, difficulty of geology which makes seismic blind to it, such as steep bedding, salt, pre-salt deposits, basalt which does not allow the seismic waves to penetrate.
Exploration costs for investors are high and must be paid for during the exploration phase. The return of invested capital is always a risk for the Investor. Therefore they must de-risk their exploration dollar as much as possible. Investment in Indonesian oil and gas exploration has reached alarming lows. Only by de-risking exploration can they break the logjam.
What can the government do to help? The government finds it challenging to provide information to exploration companies because not enough exploration is happening. Therefore a catalyst is needed to incentivize the explorer to spend in the first place, (despite the lack of data which is available). Exploration companies need a risk and reward relationship on exploration spending, which they can defend to their shareholders. This is a chicken and egg dilemma, which can only be solved with new ideas.
The explorer takes all the risk and only recovers investment in the event of commercial production through the government’s cost recovery scheme. Is it any wonder that companies are reluctant to invest in the Indonesian oil & gas business? Explorers must have good reason to believe in prospectivity before they risk large sums of shareholder capital in exploration.
What is the solution to this? Has Indonesia considered using modern, alternative exploration tools that identify prospectivity in frontier basins, which would help to attract E&P companies to invest time and money? Could the government commit a relatively small investment to illustrate prospectivity in frontier basins and thereby drive investment?
In the author’s opinion, the Indonesian government must provide the catalyst if it seeks to spur investment and compress the development period for a given basin (potentially from decades to just a few years). Work programs provide the information and data which encourage license tender participation, which in turn creates more work programs, more exploration and knowledge of respective basins. Indonesia must elevate the value and level of information given to explorers and it must invest to do this. Traditional exploration tools are prohibitive and budget allocation is even more challenging.
Conventional tools used to high-grade frontier areas and pre-stage seismic surveys are airborne gravity, magnetic and radiometric surveys. There is also remote sensing such as thermal mapping and mineral indexes, these tools are of questionable value. They have their utility and place in the explorer’s toolbox, but there are limitations. Perhaps this is one reason exploration is not happening at a pace to meet the demands of Indonesia’s energy needs. Something clearly needs to change, but are geoscientists and the government willing to change?
Are their cost-effective alternatives? In short, the answer is yes, but outside-the-box thinking is required. At the vanguard of geo-professional thinking, there presently is a confluence of satellite remote sensing data, geology, advance mathematics / artificial intelligence (neural networks) and super computing power. Innovative companies are bringing these diverse disciplines together to create powerful analytical tools that are being applied successfully to solve complex geological problems and crunch extraordinary amounts of data into meaningful and actionable results. For example, there are companies using technologies that can inform on not only subsurface structure (the primary result of geophysical applications) but also on content. Sound farfetched? Companies are doing it.
Others are using pattern recognition in satellite data and locating stress fields associated with hydrocarbons (identify structure, fractures, faults and patterns associated with HCs). The huge computing power of the Cloud has enabled the crunching of enormous amounts of satellite pixel data with advanced algorithms to find small circular structures directly made by passive, Microseismic emissions associated with HC reservoirs (actually indicating the presence of HCs and their depth). Still others apply artificial neural nets (ANNs), training them with known data in a given area of interest to identify the criteria associated with prospective targets (train on myriad data points related to the known to find HCs in the unknown areas). And if well control and geophysical data is available, train ANNs to predict porosity, permeability and reservoir quality.
Innovative explorers are applying these alternative and valuable analytics successfully. Would this information in the possession of the government serve as an important catalyst for compelling exploration companies to invest in Indonesia? Wouldn’t it make sense to use such tools and methods to high-grade basins and focus exploration spending on the highest potential prospects?
To overcome the main weakness, to entice investment and to overcome drilling dry holes, you need to use innovative solutions.
Mr. George Barber has been in Indonesia for the past 22 years. He is a Hydrographic Surveyor by background and have been involved in various projects connected with exploration and maritime worldwide and in Indonesia.